Road to Recovery: Nevada leads in ‘economic momentum’ amid rapid labor turnover
Welcome to the fifth installment of “Road to Recovery,” a recurring feature that provides semi-regular updates on Nevada economic news and data.
The state’s economy has been hit hard by the COVID-19 pandemic. Restrictions on public activity have resulted in businesses closures and thousands of lost jobs, and many parts of the economy have yet to return to their pre-pandemic state. As Nevada’s recovery from the pandemic continues, this series will take a closer look at the most important economic indicators across the state.
You can find the latest data on our “Nevada Recovery Dashboard” data page and on Twitter. (Follow Tabitha Mueller for updates on housing data and Howard Stutz for updates on gaming and tourism numbers). Also, feel free to reach out to [email protected] with any questions.
Below, we take a closer look at the meaning behind a recent Federal Funds Information for States report that ranked Nevada first in the nation for “economic momentum” and the volatility of the state’s labor market.
The rapid rate of labor turnover has been driven, in part, by American workers leaving their jobs at a record pace, prompting many to call the movement the “Great Resignation.” But economic experts in Nevada highlighted the inaccuracies of that label, pointing out that many workers have transitioned to new jobs or have reevaluated their participation in the labor market entirely.
First in ‘economic momentum’
A report released late last month by the Federal Funds Information for States ranked Nevada first in the nation in terms of “economic momentum,” a metric based on year-over-year growth in personal income, employment and population. Federal Funds Information for States is a service created by the National Governors Association and the National Conference of State Legislatures that provides reports on financial policy.
Those parameters help highlight how Nevada has bounced back at a rapid pace from a two month-long recession at the start of the COVID-19 pandemic that saw unemployment climb to its highest level in state history, but experts caution that those few statistics do not capture the complete picture.
“If they had thrown the unemployment rate in, and we're next to last, that would have lowered our ranking considerably, I think,” said Stephen Miller, research director at UNLV’s Center for Business and Economic Research (CBER).
For several months last year, Nevada had the highest unemployment rate in the nation, but as businesses found their footing, enhanced unemployment benefits expired and hiring sped up, that rate gradually fell from 8.5 percent in January 2021 to 6.8 percent in November.
That number for November, the latest month with available data, marked the first time Nevada’s unemployment rate fell below 7 percent since the pandemic began. But despite the gradual improvement, Nevada still had the country’s second worst unemployment rate in November.
Still, the momentum index is indicative of the Nevada economy’s positive movement in 2021.
“I wouldn't say, ‘Hey, everything's great,’ without looking at ‘Hey, we had a big hole to dig out of.’ But I also don't think that you should discount the growth,” said David Schmidt, chief economist for the Department of Employment, Training and Rehabilitation. “We had a big hole. We have done a good job rebounding, and I think that's really what's reflected in that ranking.”
Composed of three main components, the ‘economic momentum’ index for December shows Nevada ranked 17th in the country in personal income growth from the third quarter of 2020 to the third quarter of 2021, second in employment growth from November 2020 to November 2021 and ninth in population growth from July 2020 to July 2021. (The timing for those year-over-year changes varies because of the availability of data for each metric.)
The combination of those factors saw Nevada hold a hefty first place advantage in the momentum index. The difference between Nevada and the second state in the rankings, Nebraska, was greater than the difference between Nebraska and 10th place state, Idaho.
But the recovery, and the state’s economic momentum, are not evenly distributed. Nevada is still down about 50,000 jobs since a February 2020 peak. Those losses are largely concentrated in the accommodation industry — a sector that includes casinos and hotels — which is still down more than 67,000 jobs, even with significant gains made since May 2020.
Employment numbers for other industries are outperforming numbers recorded just before the pandemic. In November, the retail trade industry was up 13,700 jobs since February 2020, and the transportation and warehousing industry was up 13,900 jobs.
Even as some sectors of the economy continue to suffer, many parts of the state have recovered significantly. In November, the Reno-Sparks area recorded an unemployment rate of 2.9 percent, almost identical to the 2.8 percent rate seen two years prior. In that same month, the only counties to record a higher unemployment rate than the national rate of 4.2 percent were Clark County (6.3 percent) and Nye County (4.6 percent).
Heightened labor turnover
As employment in the casino and hotel industry remains significantly behind pre-pandemic totals, Schmidt and Miller both said many of those accommodation sector jobs are likely gone for good.
With thousands of workers shifting to new industries, Nevada’s labor market has in recent months seen some of the highest rates of hires and job separations in the country.
“We have a lot of people from the same industry who have been dislocated,” Schmidt said. “They're not doing the work that they were doing before.”
From July through October, Nevada has ranked among the top three states in rate of hires, and during that time, Nevada has also ranked between second and seventh in the country for its rate of job separations.
An increasing number of those separations have been from people voluntarily leaving their jobs, categorized as the rate of quits. In July, even as Nevada had the second highest rate of job separations in the country, the state’s rate of quits ranked 18th, with quits composing about 58 percent of separations.
The rate of workers quitting their jobs has continued to rise — in October, the latest month with state-level job turnover data available, Nevada ranked seventh for its rate of job separations and third for rate of quits. Quits composed more than 70 percent of separations.
Since the beginning of the pandemic, more and more Nevadans have left the workforce. Some have retired early. Others have had to take care of their families amid difficulties with finding child care. Schmidt added that some people might be motivated to leave work for higher wages — data from the Federal Reserve Bank of Atlanta shows that wage growth has been higher for job switchers than for job stayers as far back as December 2018.
National-level data also indicates that quits likely remained high in Nevada during November. The Bureau of Labor Statistics announced earlier this month that 4.5 million Americans quit their jobs in November, up from 4.2 million in October and the largest number in the two decades that the federal government has kept track of the data. State-level data on labor turnover in November will be available later this month through the bureau.
Though the prolonged high rate of quits has been labeled as the “Great Resignation,” Schmidt and Miller said that does not fully describe the ongoing changes in the labor market. Droves of workers are voluntarily leaving their old jobs for higher pay or different work. Even as quits continue at a historically high rate, hirings have outnumbered quits, and the unemployment rate continues to decline. Those changes have been described as a “Great Reshuffle,” or a “Great Reevaluation,” as Miller put it.
“My colleagues and I here at CBER like to call it the “Great Reevaluation’ — that is employers and employees have taken the time during the pandemic … [to] rethink about their participation in the labor market,” Miller said.
Amid the dynamic changes in the labor market, Miller noted that the rapid turnover pace is not entirely new.
“The job market is always churning, so it always has some volatility, probably a lot more than most people realize,” he said.
He added that the pandemic has increased the volatility, partially because of the drop in workforce participation, which is the denominator in the equation. With fewer people in the workforce, the rate of hires and separations will increase even if the number of people being hired and leaving work remains the same.
As Nevada enters a new year of economic recovery in 2022, Schmidt said he expects hires to continue at a fast pace.
“I think probably early in the year, we'll still continue to see a lot of the same pace that we've seen with employment growth, moving up at a rapid clip compared to what we've seen historically,” he said.
Schmidt also said that the volatility of the labor market could have a positive effect on the state’s economy moving forward, especially as former hospitality workers move into new industries.
“I think that dynamic activity, while it poses costs and challenges in the short run, also helps prepare you really well for the future because you're able to continue to adapt to attract new industry,” he said. “As a consequence, we'll see more diversification. We'll see more people moving into new industries.”